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A Look at the Last Market Cycle's All-Weather Funds

Plus, CGM Focus, Amana Funds, American Funds, and Fairholme did well.

Morningstar Analysts, 08/31/2009

Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.

It has been almost six months since the stock market (as measured by the S&P 500 Index) bottomed in early March. While it is anyone's guess as to whether the market will hit fresh new lows in the future, we thought it would be interesting to see which large-cap domestic-equity funds did the best over this past market cycle.

The short-term performance of equity funds is often nothing more than noise. But looking at a full market cycle, and preferably several full market cycles, can give an investor an idea of how a fund behaves in rising and falling markets.

Now, there are a lot of ways to define a full market cycle, but it should include both a bear and bull market. You can go from market peak to market peak, such as September 2000 to November 2007, or from trough to trough, such as October 2002 to March 2009. Both were about seven years, which is a decent amount of time to measure an investment approach.

For this exercise we focused on the Oct. 4, 2002, to March 9, 2009, period (trough to trough). We searched for large-cap actively managed funds (both load and no-load) with at least $100 million in assets as of August to see which did best. We also looked at how some of the industry's biggest and more interesting funds fared. Here they are.

Best-Performing Funds...........Anlzd Total Ret (%) 10/4/02 - 3/9/09
CGM Focus CGMFX: 10.1
Amana Trust Growth AMAGX: 8.75
Amana Trust Income AMANX: 8.03
Eaton Vance Dividend Builder EVTMX: 6.78
Vanguard Capital Opportunity VHCOX: 6.31

Largest Actively Managed Funds 
American Funds Growth Fund of America AGTHX: 1.96
American Funds Invest Co of Am AIVSX: 0.28
Fidelity Contrafund FCNTX: 2.96
American Funds Washington Mutual AWSHX: -0.93
American Funds Fundamental Investors ANCFX: 2.59
Dodge & Cox Stock DODGX: -1.47
Vanguard Windsor II VWNFX: -0.20
Davis NY Venture NYVTX: -0.88
Fidelity Growth Company FDGRX: 4.21
Vanguard PRIMECAP VPMCX: 4.06

Popular Funds 
Fairholme FAIRX: 3.88
Sequoia SEQUX: -1.31
T. Rowe Price Equity Income PRFDX: -1.50

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